ERIC COLLINS SEES opportunity where others don’t. The tech entrepreneur turned impact investor – appointed to President Obama’s council to drive small businesses – has much on his plate.
In 2018, he co-founded Impact X Capital Partners, which invests in underrepresented entrepreneurs in Europe and the UK particularly from the Afro-Caribbean diaspora and women, capitalising on experiences started in the US. It’s all based on the simple rationale that there are inefficiencies in capital markets. Therefore, many businesses, especially Black and women-led organisations, that are overlooked by other investors for whatever reasons provide huge investment potential.
So far, Impact X says it has generated venture scale returns for its LPs (limited partners) and has a pipeline of over £3bn in unmet capital demand.
But the mission statement of Impact X also says it “believes in social change, and through successful venture investing, the creation of wealth can be achieved. It can be leveraged to drive great improvements to our society and our chosen communities.”
Now Collins is very much focused on this side of the Atlantic. Since 2021 he’s been the host of Channel 4’s business reality show The Money Maker and was recently voted one of the most influential Black people in Britain.
He’s here for a reason. Collins says inequities and inefficiencies in Britain mean the UK economy is significantly underperforming: “Billions are lost every day in the UK because of the capital inefficiency of underinvestment. If we were to allocate investment capital proportionately, annually about £75bn could be added to the GDP of the UK.”
Mission statement
To understand Collins’ mission, it’s important to backtrack to his stellar career, in which he excelled academically at Princeton University and Harvard Law School, where he was a contemporary of future president Barack Obama.
It was a peer group that developed into a powerful network which he has drawn on as a dealmaker in years to come. It also led to Obama appointing Collins to the Small Business Administration’s Council on Underserved Communities (SBACUC).
Roger Fisher, his professor at Princeton who penned bestseller on negotiation Getting to Yes, hired Collins for his consultancy that worked with tech giants and professional services companies such as Microsoft, Oracle, IBM, PwC and Deloitte. “We spent our time helping organisations to weather fundamental changes and not become obsolete too quickly,” he says.
Included in that set was Eastman Kodak, the failed photography-related group that has since become the ultimate symbol of a corporate destroyed by disruptive forces.
Sebastian Nevols
“When I looked around those organisations there weren’t a lot of people who looked like me in positions of power making very big decisions. I didn’t see them in the up-and-coming ranks either,” he says.
Despite the rollercoaster ride of the tech boom and bust, Collins made his way into senior positions, becoming chief operating officer of Mobile Posse/Digital Turbine and then chief revenue and distribution officer of predictive text firm Swiftkey, a role that brought him to London a decade ago. More recently, Collins became COO of Touch Surgery/Medtronic before launching Impact X, along the way joining up with Microsoft to launch Impact X Venture Studios. It came about through sitting on the board of Vital Wave, which looks at how philanthropic and non-profit organisations can amplify their effectiveness in markets, which worked closely with the Gates Foundation and the UN Foundation.
But Collins’ big foray into supporting underrepresented companies and leverage entrepreneurship as a catalyst for social change came when Obama appointed Collins to the SBACUC. “One cornerstone upon which a Black middle class and all its positive byproducts have been built are the various programmes of the small business administration. But what we found was that once underrepresented companies get to a certain size, like all businesses, they can run into difficulty because they don’t have sufficient working capital to be able to continue to partner with large customers including the US government,” he says.
Pursuing fast-growth entrepreneurial ventures as a solution to societal disparities was where Collins and like-minded peers landed as a strategy. That would eventually result in the launch of Impact X where he says: “Entrepreneurship is a catalyst for developing new opportunities, creating jobs, experiences, networks, success narratives, wealth, future investment opportunities and the risk capital controlled by the under-represented, which can be deliberately deployed to advance social change.
“From this cycle, true wealth can be sustained and subsequently individuals can drive their own agendas. Thus creating social impact by supporting others to achieve ever greater levels of success.”
Sebastian Nevols
An important figure in Collins’ world was media entrepreneur Cathy Hughes, who chaired the SBA (Small Business Administration) committee that Collins worked on. Her Radio One network started off as a small station in Washington DC and became a large listed entity in 1999, making her the first African-American woman to head a publicly listed corporation and minted her as a self-made billionaire.
“Cathy is an example of what happens when you have access to capital. She was able to take that capital and do a lot with it,” says Collins, who says the model of Radio One reflects the sustainable approach that he seeks when VC investing.
“For Impact X, sustainability means we build organisations from populations that are under-represented, that experience inefficiencies in capital allocation, and have disruptive solutions. This is a great competitive advantage.
“By competitive advantage, I mean that compared to other fund managers, how do we get as good as if not better returns on investment?” questions Collins. “By looking at inefficiency. Most people would say it just makes sense if you believe talent and good ideas are fairly evenly distributed; but allocation of capital tells you that something is wrong with the system in terms of actually assigning capital to good ideas and backing talent.”
Why is that the case? “I think there’s both systemic biases and individual biases, and those are playing actively in the system.
“So we started looking for places where other people don’t seem to be investing for whatever reasons, investigating and engaging in both company and founder diligence to find growth opportunities and then doubling down on those opportunities, with both financial investments and unique value add. In turn, achieving venture-scale returns and attracting more capital to our thesis, which makes for a sustainable business model,” he says.
Driving change
When it comes to investment targets, Impact X tracks a double bottom line. Collins says companies are measured on both financial ROI (return on investment) as well as how they effectively leverage wider societal demographics. He says each firm is required to continually report how many people of colour and women are founders, in the C-suite, on the board, in P&L responsible roles and within the engineering organisation’s decision makers.
“We’re asking: how are demographics trending over time? So we look at all those metrics on an ongoing basis because Impact X can add unique value and help those organisations to continue with their differentiated strategies,” he says.
When it comes to looking for opportunities this side of the Atlantic, Collins says there are “many interesting similarities” between the UK and the US. “The most interesting one is that there is an inefficiency in the allocation of capital by asset managers as well as by asset allocators to underrepresented class,” says Collins.
“In the United States, you’ll find about 1% of venture capital has gone to the under-represented class over the last decade, in the UK it’s been about 0.24%. So that’s a very big difference,” he adds. Part of the issue, according to Collins, is that despite headline efforts to address issues such as underrepresentation of women on corporate boards and the C-suite, vast inequities continue to exist for under-represented entrepreneurs, leading to the his view that the UK is suffering from a £75bn shortfall.
Aside from the positive impact of a boost to the economy, Collins is focused on the broader impact of the investment on communities that suffer most from under-investment. “In the UK and around the world, the biggest determiner of what’s going to happen to you educationally and in terms of health and wealth is determined by where you were born and raised,” he says.
Sebastian Nevols
Consider the negative impacts on health from living in very dense and highly polluted neighbourhoods; the persistent education disparities; or wealth disparities resulting from one in two Black British children living below the poverty line.
“Impact X subscribes to the belief that we can accelerate a virtuous circle. Start fast growth companies that create future-resistant jobs. Employees can stay in the organisation, they can colonise other organisations and / or start new innovative companies. At some point, some of these companies will exit and then risk capital is released, and that capital can be used for any number of things. This would include philanthropy, putting money behind other causes which have underrepresented people. But most importantly that risk capital can be used to expand funding to the next generation of disruptive under-represented entrepreneurs ” he says.
“The opportunity is to control capital. You can go to the government as much as you want and ask for your fair share, but if you control a pool of pounds and pence yourself, you’re able to do whatever you like with them. That’s what we’re doing: building and then releasing capital into the hands of underrepresented people.”
If we were to allocate investment capital proportionately, annually about £75bn could be added to the GDP of the UK
In the meantime, companies such as Impact X-backed insurtech firm Marshmallow, the UK’s second Black-founded unicorn (with a value of more than $1bn), recently named by the Financial Times as Europe’s second-fastest growing company is what Collins is talking about.
“They have been able to grow year over year and double in size. They have 50% women and 20% people of colour in key roles. They’re creating wealth, and that wealth can be used for various things, whether at some point Marshmallow will be sold or will go public,” he says.
More broadly, the kinds of societal change Collins is working on leverages fintech and health tech – aspects of a more sustainable future where AI is at the heart. It’s an approach that he says determined his decision to become a brand ambassador for Audi’s electric cars.
“It was part of the conversation about making a difference: you have to ask yourself, what are some of the things that can be done incrementally – micro activities that could happen in your household – that, on a macro level, will ultimately affect every car?” he says of the partnership.
Sebastian Nevols
Collins, author of We Don’t Need Permission: How Black Business Can Change Our World, is currently reading books by Lorraine Hansberry, James Baldwin and Marty Washington. “A bunch of people who, in the context of social change, have put themselves on the front lines and have actually been very involved.”
He’s also interested in visual art, naming Barbara Walker, who’s just been nominated for a Turner Prize; Claudette Johnson whose Courtauld solo show is coming up; Phoebe Boswell currently on institutional display in Berlin and Toronto as artists he’s interested in, as well as up and coming Black artists Beverley Bennett and Maria Amidu, “we are working to advance artist’s careers by participating in the art world – both directly with artists as well as through the infrastructure of that world such as museums, galleries, festivals and auction houses – to make sure that these talented artists’ work can enter the mainstream art canon. Ours is an investment to help them progress their art practices,” he says.
The next big project will see Collins tackling inefficiencies in the water industry. Combining Impact-X Venture Studio with innovation centre of excellence Spring, the aim is to provide tools and funding to accelerate transformation across the sector. Who would bet against him?
For more, see impactxcapital.com
